Newark's much-debated request for the power to tax the University of Delaware never came up for a vote in the state legislature this session, but the city's finances still received a major boost as the session came to a close on Sunday.
Legislators allocated $2 million for Newark, meant to make up for the property tax revenue lost due to UD's tax-exempt property. The amount is equivalent to what the UD tax would have generated.
For the past few years, the city has received $450,000 from the state, and the significant increase is welcome news to Newark officials who will face a budget shortfall this fall.
“Newark did well,” Mayor Jerry Clifton said Monday. “In all my years in the political arena, I've never seen legislators come together to help any one area like our legislators came together for us in the last few months.”
He specifically praised Rep. Cyndie Romer and Rep. Paul Baumbach.
“Our legislators were absolutely amazing,” Clifton said. “I am so impressed, I can't put it into words.”
Newark officials have spent the past few months scrambling to find new revenue sources to help offset rising personnel costs and inflation. Without the state money, residents could have faced up to a 30 percent tax hike.
In February, city council unanimously passed a resolution asking the legislature to grant Newark the power to charge UD a tax of up to $50 per student, per semester.
The idea was vehemently opposed by UD administrators and students, but city officials argued it is time for the university to pay its fair share.
UD owns approximately 42 percent of the land in Newark, and nearly all that property is tax-exempt. That means that the remaining 58 percent of property owners are left to shoulder the entire tax burden, even though UD students use city parks, roads, police and other services that are paid for with tax money.
Officials estimate that the city loses $6 million a year in property tax revenue due to UD’s tax-exempt status.
Romer, the state representative who represents the southern half of Newark, said she fought hard for the bill authorizing the tax on UD. Though she won over many colleagues, she worried she wouldn't have enough votes to clear the two-thirds majority needed to pass a city charter change.
In consultation with Newark leaders, she decided to pursue the state funding for the city rather than risking the tax bill being defeated.
“We could have walked away with nothing,” she said.
The $2 million was included in the annual grants-in-aid package, which allots money for nonprofits, fire companies and other organizations. This year's grants-in-aid bill contained a record-setting $98 million in allocations.
The money for Newark was structured as a public safety aid package for cities that contain universities with on-campus residence halls. Dover, which is home to Delaware State University, received $1.6 million.
Newark also received a separate allocation for various capital projects, for at least the third year in a row. That $1.5 million is earmarked for water utility infrastructure, park equipment and upgrades to city facilities.
Permanent solution sought
The $2 million Newark received in the grants-in-aid bill is merely a stopgap measure aimed at preventing a budget crisis this fall.
Meanwhile, Romer, State Sen. David Sokola and other legislators are working on a permanent solution that would guarantee Newark a yearly revenue stream through inclusion in the payment-in-lieu-of-taxes program.
The program, commonly known as PILOT, is meant to compensate cities that have a large amount of tax-exempt property. Wilmington, Dover and Georgetown share a pool of millions of dollars each year, but Newark receives nothing.
Newark has tried for more than a decade to get included, but the effort never gained traction until last week, when the legislature established a task force to make recommendations to modernize PILOT. The task force will include Clifton, along with representatives of Wilmington, Dover and Georgetown and several state legislators.
The group's report is due by the end of the year and after that, Romer expects legislation to be introduced to implement the recommendations.
Romer said including Newark in PILOT is necessary.
“It's just wrong that Newark hasn't been included in this,” she said. “This is what payment in lieu of taxes is supposed to be about, and over 40 percent of the City of Newark is non-taxable, so there's really no reason they shouldn't be part of it.”
Even if Newark is included in PILOT, Romer said she might make another attempt at authorizing a tax on UD next year.
“I think it's great legislation,” she said. “I really see it as a student impact fee, and I think cities and towns across the country really feel this impact of large universities that have such great amounts of non-taxable property.”
UD banned from paying bills with credit card
Another provision, which Romer was able to slip into epilogue language in the grants-in-aid bill, will provide significant savings to the city.
It prohibits the University of Delaware – Newark's largest utility customer – from paying its utility bills by credit card.
When a customer uses a credit card, credit card companies take a small percentage of the amount paid. The city incurs nearly $375,000 in processing fees each year related to UD's bills alone.
The processing fees have long been a sore spot for city officials, who have tried to no avail to get UD to pay by check or direct bank transfer.
The provision applies only to the next year, but Romer is considering introducing legislation to make the prohibition permanent.
“This is a great savings,” she said. “That's probably what I'm most proud of. It's just been going on for so long, and it's just not in the spirit of partnership to be having the city incur that much in credit card fees.”
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